Why The Supreme Court's 'Grokster' Decision Led To More, Not Less, P2P Filesharing

from the watch-out-SOPA dept

In the 2005 "Grokster" decision, the Supreme Court ruled unanimously that file sharing networks could be held liable for copyright infringement if they take "affirmative steps" to encourage infringement. Grokster closed down as a result, and the recording industry pretty much assumed it had won that battle.

But as a fascinating analysis by Rebecca Giblin of what happened afterwards points out, against the industry's expectations, P2P filesharing flourished:

By 2007, two years after the US Supreme Court decided Grokster, there were more individual P2P applications available than there had ever been before. The average number of users sharing files on file sharing networks at any one time was nudging ten million and it was estimated that P2P traffic had grown to comprise up to 90 percent of global internet traffic. At that point content owners tacitly admitted defeat, largely abandoning their long-time strategy of suing key P2P software providers and diverting enforcement resources to alternatives like graduated response or "three strikes" laws.

So what happened? In her article, Giblin suggests pre-P2P laws were rooted in the physical world, and this led to four false assumptions being made about P2P software development that allowed it to thrive despite the Grokster decision.

The first [assumption] is that everybody is bound by physical world rules. Assuming this rule had universal application, various secondary liability principles evolved to make knowledge and control pre-requisites to liability. But software has no such constraint. Programmers can write software that will do things that are simply not possible or feasible in the physical world. So once the Napster litigation made P2P programmers aware of the rules about knowledge and control, they simply coded Napster's successors to eliminate them – something no provider of a physical world distribution technology ever managed to do.

Napster's fatal weakness was its centralized directory servers: shutting them down meant the entire system collapsed. True P2P software has no central directories, and therefore no one point of failure. The Grokster decision tried to address that issue:

In response, the US Supreme Court in Grokster created a brand new legal doctrine, called inducement, that did not rely on either knowledge or control. That rule was aimed at capturing "bad actors" - those P2P providers who aimed to profit from their users' infringement and whose nefarious intent was demonstrated by "smoking guns" in their marketing and other communications. But the inducement law failed to appreciate some of the other differences that make the software world special and thus led directly to the explosion in the number of P2P technologies.

That's because three other physical-world assumptions were made:

One is that it is expensive to create distribution technologies that are capable of vast amounts of infringement. Of course in the physical world, the creation of such technologies, like printing presses, photocopiers, and VCRs required large investment. Research and development, mass-manufacturing, marketing and delivery all require massive amounts of cash. Thus, the law came to assume that the creation of such technologies was expensive.

That led directly to the next assumption – that distribution technologies are developed for profit. After all, nobody would be investing those massive sums without some prospect of a return.

Finally comes the fourth assumption: that rational developers of distribution technologies won't share their secrets with consumers or competitors. Since they needed to recoup those massive investments, they had no interest at all in giving them away.

Of course, free software offers hundreds of thousands of counterexamples to all of those assumptions: major applications are written in people's bedrooms (hello, Linus), "just for fun" (Linus again), with the aim of sharing them as widely as possible (hello, Richard Stallman.)
As a result of this deep misunderstanding, the Grokster decision led not to the disappearance of P2P programs, but to an unprecedented flowering of open source implementations:

When the US Supreme Court created its new law holding P2P providers liable where they "fostered" third party infringement, as evidenced by such things as business models, marketing and internal communications, the result was an enormous number of programmers choosing to create new applications without any of those liability attracting elements. In the absence of any evidence that they had set out to foster infringement, they could not be liable for inducement, and having coded out of knowledge and control they could not be held liable under the pre-P2P law either.

As Giblin concludes:

The mismatch between the law's physical world assumptions and the realities of the software world meant that the law created to respond to the challenges of P2P file sharing led to the opposite of the desired result: a massive increase in the availability of P2P file sharing software. The failure of the law to recognise the unique characteristics of software and software development meant the abandonment of the litigation campaign against P2P providers was only a matter of time.

This is an important reminder that framing legislation affecting the world of software is not like traditional physical-world law-making. Problems are precisely what drives forward open source development by offering an interesting "itch" that needs scratching, so new laws merely provide an impetus to the creation of more sophisticated ways of circumventing them. It's a lesson the supporters of SOPA would do well to learn.

Reader Comments

Great Article, but P2P can also be fully legitimate

It is a great article, but sometimes it is worth stating the obvious to go with it:

There arenumerous legitimate uses for P2P software. Many large software packets (OpenOffice and many Linux ISOs) are most effeciently distributed by P2P software, especially if the distributor is a small operation for whom bandwidth is a major line item.

I suggest you again read the Grokster decision. It did not get into trouble because it wrote and distributed software. If this was all it had done the case would never have gotten past the pleadings stage in view of MGM v. Sony.

Grokster got into trouble because of things it did in the physical world; i.e., specifically encouraging users of the software to engage in illegal downloading.

I would suggest that maybe the Grokster decision was perhaps only tangentially related to the increase of file sharing.

Much the same way that Clinton's balancing of the budget was tangentially related to the soaring DotCom economy.

Clinton may have balanced the budget (with help from GOP obstruction) but the economy was growing enough that most anyone would have been able to balance it with that much increased tax revenue coming in. (I'm quite liberal so this isn't a bash at Clinton :) )

The file sharing was only increasing because people liked it, not because of the reaction to Grokster. It may have jump started people moving to more and varied sources, but the trend was already there and likely would have happened whether or not Grokster got shut down.

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Perhaps you should actually read the article:

In the 2005 "Grokster" decision, the Supreme Court ruled unanimously that file sharing networks could be held liable for copyright infringement if they take "affirmative steps" to encourage infringement.

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"Grokster got into trouble because of things it did in the physical world; i.e., specifically encouraging users of the software to engage in illegal downloading."

I read the article and that was the point that came across BEFORE reading your comment.

As stated here: "When the US Supreme Court created its new law holding P2P providers liable where they "fostered" third party infringement, as evidenced by such things as business models, marketing and internal communications, the result was an enormous number of programmers choosing to create new applications without any of those liability attracting elements. "

That word "marketing" might have something do with "encouraging users of the software to engage in illegal downloading," unless Grokster did it some other way?

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To my knowledge, Grokster software was not materially different from other P2P software. They are all tools that can be used for good and bad. Where Grokster crossed the line was when it then began doing things in the physical world that have long been recognized as legally suspect.

One basic proposition that is a take away from Sony is that a tool that has lawful uses is insufficient to create liability simply because some employ the tool for unlawful purposes. If Grokster has stopped there the case would have gone nowhere. Unfortunately for for them, the Grokster principals took an otherwise useful (and liability-free) tool and then encouraged others to use it to engage in unlawful acts.

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Grokster got into trouble because of things it did in the physical world; i.e., specifically encouraging users of the software to engage in illegal downloading.

How did it do that specifically in the real world? I don't remember ever seeing an ad for Grokster, and no Grokster goons showed up at my house with a gun or with money encouraging me to use Grokster to engage in illegal downloading.

What Grokster did was offer a service -- which their users used. I am not happy with the Supreme Court ruling on this, but I am pretty sure that the Supreme Court decision never said that Grokster physically encouraged users, just that they made their service so useful in trafficking infringed works. And can you please explain "illegal downloading." It does not appear in my technical dictionary -- Downloading is downloading, it can't be legal or illegal. It is only what you are downloading that may be illegal.

Re: Re: Re: Great Article, but P2P can also be fully legitimate

Drug abuse is a social problem - just like copyright infringement...

You can't simply pass laws to criminalize social behavior - it doesn't work in the long run. But, it's often used as a stepping stone for certain industries to make a boatload of money before anyone realizes the mistake.

Re: Re: Re:

One basic proposition that is a take away from Sony is that a tool that has lawful uses is insufficient to create liability simply because some employ the tool for unlawful purposes. If Grokster has stopped there the case would have gone nowhere. Unfortunately for for them, the Grokster principals took an otherwise useful (and liability-free) tool and then encouraged others to use it to engage in unlawful acts.

Oh, give me a break -- they have been fighting against the Sony ruling long afterwards. The Supreme Court may agree that the tools shouldn't be used mainly for illegal acts -- but the content industry would love to see any tool that may remotely have infringing uses regardless to its legal usefulness, i.e. BitTorrent, which is used by a lot of organizations to traffic in open source software or purely legal to copy material.

Shutting down Napster was the worst business decision in history

The Music Industry doesn't realize it or at least denies it but shutting down Napster was a cataclysmic event on par of what would have happened to the Movie Industry had they successfully destroyed the VCR. Napster was their perfect opportunity to enter the digital age and opened up to them a new business model that would have raked in billions of dollars for the industry. It had central servers so it was easy to control and meter. It had name recognition and an automatic customer base. Had the Music industry embrace Napster the Music biz would be in the midst of their Golden Age with no end in sight.

Wrong conclusion about legal loopholes.

"the result was an enormous number of programmers choosing to create new applications without any of those liability attracting elements."

YUP, dodging the clear intent of the law besides the morality of stealing the property of others.

"the law created to respond to the challenges of P2P file sharing led to the opposite of the desired result:"

YUP, pirates abound, but piracy still ain't right.

The wrong conclusion you make is about the motives: pirates are gonna pirate so long as they want the content AND CAN GET AWAY WITH IT. No one is arguing that. The intent of SOPA is (its /surface/, anyway) to close up some more legal loopholes that allow Rapidshare and dozens of others to operate right out in the open.

Piracy must be driven into hiding, and likely can be. That's the answer I gave to when you'd know SOPA was successful.

A small amount of piracy can be tolerated, but ever-increasing amounts of it RIGHT OUT IN THE OPEN CAN'T BE, AND WON'T.

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The fact it has remained in place for about 30 years should tell you something.

The groups that have been most vocal about "fixing" the Sony decision has been the content industry. DMCA/SOPA/PIPA etc, are all methods bought or being bought to "fix" the Sony decision. Sure, BitTorrent has legitimate uses, but since BitTorrent is used for illegal purposes, then the website it is available from is a Rogue site and all money for the software will be stopped at the payment processors.

Re: Wrong conclusion about legal loopholes.

Ootb, why do you keep using the slashes? /surface/ What possible reason do you have for using them?
And how do you define a small amount of piracy? A kid sharing a handful of songs? Trading files by swapping hard drives? Exactly when do we reach the stage where it can be tolerated?
And Techdirt, please don't answer for him/her. I want Ootb to answer for him/herself.

Re: Re: Re: Great Article, but P2P can also be fully legitimate

Well said. Cocaine was made illegal for essentially the same reasons. In addition to of course being made illegally in an effort to criminalize African Americans who used it. (If you look at the history of how it became illegal, you'll see that they attempted to credit cocaine use with "uppety Negroes". Not necessarily put that way, but it was the basic gist of it.)

Re: Wrong conclusion about legal loopholes.

"morality of stealing the property of others"

And just as soon theft actually happens people will be up in arms. Shame there has been no 'theft' at all in file sharing.

But you knew that right?

Just because something *can* be used illegally doesn't make that service illegal. Guns should be illegal by your definition. Cars too. Phones. Banks. Baseball bats. Take your pick. Everything can be used for good and bad.

Trying to stop the intent of use by banning the tool works marginally at best in the physical world. In the digital world of the internet it simply doesn't work at all.

You can ban a book and burn all copies of it in your country. What happens when anyone can read any copy anywhere in the world? And an infinite number of copies can be made at zero cost? You simply can't ban that. You can try, but you'll never win against that scale of reproduction, no matter how 'right' you are.

Re: And that's why no one can obtain...

Re: Re: Re: Wrong conclusion about legal loopholes.

the funny thing is part of the reason the industry puds are so upset about piracy is all the fake pirate sites that list this torrent is being seeded by 100,000,000,000 users, when in fact the torrent doesn't exist or was only ever downloaded 8 times. So not only is it a problem because its in the open its a problem becuase industry stooges can't tell the difference between real piracy or people trying to give you malware and steal your info.

The authors' comparison of open source software to music is flawed like any flawed apples and oranges comparison. Linus CHOSE to make his software open source, as was his right. Tens of thousands of musicians, producers, recording engineers, songwriters, etc. did not choose to let billions of people take their creative work without paying for it. When you download an album on BitTorrent you are violating the rights of the creators just like if someone withdrew money from your bank account online without your permission. It is a job of government to protect those who can't protect themselves. These billion-dollar search engines, ad networks and ISPs making billions on the backs of content creators have become the newest members of the club of corrupt corporate greedmongers. They make far more money as a group than the "evil labels" ever did. At least the "evil labels" actually did pay songwriters and musicians and invest in new artists. The new bosses pay zero, invest zero in content and call it censorship to even attempt to level the playing field.

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Up until "It is a job of government..." you make valid points. After that you stretch things a bit and crash.

The playing field is level. It's the game that has not been established. The old game, really, has been rendered obsolete. No longer functional. Clearly. ITunes is just a warmup (and the old muscle of music/movie control is tired). The old interests keep stifling true progress and yet expect individuals to help them keep the old game going, now they beckon our government. They need a new model and to step back and create a new game (or at least genuinely contribute to a game played *with* their audiences).

And, you control freaks you, the globe would rather you took your stuff and went home until you figure out how to play with others. As if the Internet exists and is sustained by your stuff. Your stuff is there. Period. That's it, your stuff is riding shotgun.. not driving. You want to make some money? Then perhaps you should learn how to be a good passenger first.

I, for one, would rather see your screens go black than for mine to be at your beck and call.

Re: Re: Re: Re: Great Article, but P2P can also be fully legitimate

Cocaine was made illegal for essentially the same reasons. In addition to of course being made illegally in an effort to criminalize African Americans who used it.

No... The hard ban was created by Nixon as a control mechanism. He was hard pressed to go after the hippies in 1973 because of the social movement that was going on to "Tune in, turn on, drop out." This is a massive overgeneralization on my part, but the fact remains that the racial factor wasn't the major factor in his campaign against the legal use of drugs.

I'll grant you that drugs passing around was something that he wanted banned. Nixon was crazy like that. I'll even say that there's a chance some medical groups got a hold of him. And judging from the disproportionate amount of African Americans that are in jail, the plan succeeded, similar to how immigration disproportionately locks up Latino Americans.

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Oh, and for those that can't click and read:

"At first glance you'll find this 12 piece puzzle to be quite colorful. Don't let the plastic pieces fool you though, this is not an easy puzzle. Just to make it harder, if you have two puzzles, they combine to make another puzzle. Whatever happens you'll have a great time getting this puzzle together to form a cube."

Rikuo - Universal and other labels had provided great wealth for thousands of artists and a good living for hundreds of thousands of artists, songwriters, musicians, recording engineers for decades. Try again.

However, you are correct. It wasn't until the early '70s that it was deemed a controlled substance, specifically under the "Controlled Substances Act".

I do like that you said "Nixon was crazy like that" though. I recently helped a friend research a paper, with one section specifically focusing on Nixon and we came to the conclusion that "Nixon was hella crazy". Lol.

Re: Wrong conclusion about legal loopholes.

"...stealing the property of others."

Hear that dull thud? That was the sound of your entire argument falling flat on it's face because you once again conflate the removal of physical property with the copying of a digital file. Everything else you write after that is just meaningless blather as a result.

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Yeah, the logic is undeniable. After all, we really do want to drive all internet businesses out of the United States, and to use payment processors that are not under the jurisdiction of the United States government.

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Yes...but since you clearly didn't click the link, let me summarize it for you: Universal didn't pay their artists. Didn't. D.I.D.N'.T
And when the courts told them to, they turned around and tried to get their insurance company to pay the bill.

As I said, if you want to defend the labels and criticise downloaders for not paying artists, it helps if the labels you're defending aren't guilty of the exact same thing!

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Abusive contracts? They pay people up front for creating works and transfering (in most, but not all cases) of the rights. I cannot help it if the ones signing the contracts do not read for comprehension the terms of future royalty provisions. Moreover, they take the financial risk that the people may fizzle with the consuming public.

Abusive laws? Perhaps you would be so kind as to provide an example of where you or someone who is close to you has been abused because of copyright law.

Those assumptions are inherent

Those same assumptions are what justify restricting "making copies" in the first place. "Making copies" in itself isn't really a problem to rightsholders, provided those copies are kept private (indeed, some copyright laws allow the making of private copies). Because the technologies for making copies were expensive at the time the first copyright laws were written, it was reasonable to assume that nobody would go to that time and expense unless they intended to distribute those copies, for profit. Hence "making copies" was added as an exclusive right, but really only because it was a good indicator of "intent to distribute".
Nowadays, of course, we make copies all the time, without even knowing it, so it really is time to change copyright law so that making copies (but not distributing them) isn't one of the exclusive rights granted. Copyright law would be much cleaner, simpler, and more technology-neutral as a result.